Wednesday, July 08, 2009

Timmay Makes a Poopy

US lurching towards 'debt explosion' with long-term interest rates on course to double
The US economy is lurching towards crisis with long-term interest rates on course to double, crippling the country’s ability to pay its debts and potentially plunging it into another recession, according to a study by the US’s own central bank.
UK Telegraph article here.
In a 2003 paper, Thomas Laubach, the US Federal Reserve’s senior economist, calculated the impact on long-term interest rates of rising fiscal deficits and soaring national debt. Applying his assumptions to the recent spike in the US fiscal deficit and national debt, long-term interests rates will double from their current 3.5%.
Everyone with an ARM is in trouble.


Bob said...

Actually, a bit of hubris to make any prediction.

This is uncharted territory. Here lay dragons.

Lou Minatti said...

So Tim's gonna make a #2?

7% sounds good to me. I'll start getting some payback for all of that money I have parked in CDs.

Anonymous said...

Bull Dookey, they tell nothing but lies. That's the same old spew I've been hearing for years. 2% on the ten year here we come. Book it.

w said...

Exactly Edgar, it will be coordinated printing to bail out debtors world wide.

Call it redistribution.

Lost Cause said...

Interest rates set to double? To what, 2% ?

Tyrone said...

Gold, anyone???

Jean ValJean said...

Are you sure he's made a poopy?

Cuz in the picture it looks like he's still struggling with it.

Unknown said...

Tim Geithner -- toupée or natural hair?

I vote for the former. His hairline is "off", IMO.

Peripheral Visionary said...

I'm with Lex, this is uncharted territory. The Fed can actually make its own interest rate whatever it wants, by printing enough money to buy enough Treasuries to keep the yield low. But then the action moves over to the commodities and bond markets; and as soon as foreign creditors start demanding higher interest rates of corporations to compensate for inflation, it gets very interesting very quickly.

The end game is a run on dollar assets, when it becomes clear that the Fed has pumped too much money in that it can never realistically drain out. That's when interest rates explode; that could happen in the next six months, or it could be years before it happens. The likelihood of it happening has gone way up, but it's hard to say when.

Bill in NC said...

"the state of California will gladly pay you Tuesday for a hamburger today"

Unknown said...

Dawg, How're you positioning your investments in preparation? Is there a way to minimize the damaga to oneself's own finances?

Tach said...

Invest in .22LR? :)